Riverdeep shares drop 9% on large block sale

Shares in Riverdeep lost 9 per cent in Dublin yesterday as computer giant IBM and Gores Technology Group sold a large block of shares in the company.

Riverdeep shares finished 22 cents lower in Dublin at €2.23 as nearly 25 million shares, representing more than 10 per cent of the company, changed hands.

On the Nasdaq, where they are also traded, the shares closed 6.97 per cent lower at $12.95.

The stock was placed with a number of European and Irish institutions, market sources said.

The company confirmed last night that IBM, which held around 6.5 per cent of the educational software company, had sold up to a third of its holding.

IBM had been bound by a lock-up agreement, which prevented it from selling its stake for a 12-month period. The agreement, entered into last August, has just expired.

Gores Technology Group was the other seller, selling its entire 5 per cent shareholding in Riverdeep.

Its stake was not subject to the lock-up agreement and had been hanging over the shares for some time.

Riverdeep said last night that the removal of the overhang was positive for shareholders as it relieved a source of pressure on the share price.

Gores acquired its stake in Riverdeep when it sold The Learning Company to the Dublin-based group last year.

Earlier this week, Riverdeep bought Broderbund, the part of The Learning Company not acquired last year, from Gores for €58 million.

The lock-up deal - under which shareholders agreed not to sell their stock for a year - also affected the company's founder and majority shareholder, Mr Pat McDonagh, who holds a stake of around 23 per cent.

Chief executive Mr Barry O'Callaghan, who owns around 5 per cent of the company, was also locked in.

However, both men are seen as long-term holders of the stock and unlikely short-term sellers.

In an interview earlier this week, Mr O'Callaghan indicated his desire to build up his stake from its current level of around 5 per cent to 10 per cent.

There has been more uncertainty over IBM's plans for its stake with some talk in the market that it could sell it to Reed Elsevier, the Anglo-Dutch publisher, which took a 4 per cent stake in Riverdeep last year.

What it will do with the rest of its stake remains to be seen.

According to Riverdeep yesterday, it will update shareholders on the status of all lock-ups next week.